AI Could Reinforce Fossil Fuel Dominance, Study Finds

A new study suggests artificial intelligence could strengthen the competitive position of fossil fuel producers, including oil and gas firms, by driving efficiency gains that outweigh AI's benefits for renewable energy. According to a paper published in the journal npj Climate Action, AI-driven productivity gains in the fossil fuel industry could outweigh the emissions savings from using AI tools in the renewable energy sector. The authors argue that "net emissions reductions require renewables gains 4–5x greater than fossil fuel gains," and that AI could "reinforce fossil fuel incumbency."

The analysis highlights that AI unlocks productivity and efficiency gains across all energy sources. Energy consultancy Rystad Energy estimates AI and digitalization could create nearly $500 billion in cumulative value for exploration and production companies between 2026 and 2030, primarily through cost reductions, production increases, and compressed development timelines.

Meanwhile, global oil flows are adapting to geopolitical disruptions in the Middle East. Months into the Iran war, a shadow export network is moving more than 4 million barrels per day (bpd) around the Strait of Hormuz, according to an OilPrice.com report. The operation involves UAE, Iraq, Kuwait, and Qatar using AIS-dark shuttle tankers and ship-to-ship transfers outside the Persian Gulf, with around 150 vessels now gathered off Oman.

Saudi Arabia, which has utilized its East-West Pipeline to the Red Sea, is also building capacity in the shadow network. State shipping company Bahri has positioned 16 VLCCs off Oman, with capacity to carry roughly 38 million barrels. However, the Red Sea alternative faces its own threats from Houthi attacks.

In a related development, Saudi Aramco has cautiously resumed crude loadings through the Strait of Hormuz after a three-week pause. According to Reuters data, three VLCCs loaded roughly 2 million barrels each from Ras Tanura and Juaymah terminals between August 12 and August 16, with six more VLCCs potentially loading later this month. Despite this, Aramco continues to offer crude to Asian buyers via ship-to-ship transfers off Fujairah, avoiding the need for their vessels to enter the strait.

The kingdom's other major export workaround via the Red Sea port of Yanbu remains hampered, with only about 670,000 bpd expected to load this month from Egypt's Sidi Kerir terminal as an alternative, compared to roughly 4 million bpd previously exported through Yanbu.